THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

August 2, 2014

February 1, 2014

August 3, 2013

Assets

Current assets:

Cash and cash equivalents

$

38,423

$

33,431

$

64,885

Accounts receivable, less allowance for uncollectible accounts of $2,102, $1,320 and $1,211

27,908

25,152

25,386

Merchandise inventories

659,547

672,354

649,832

Prepaid expenses

21,314

29,282

21,696

Other current assets

56,172

63,405

56,199

Assets held for disposal

2,647

2,013

—

Total current assets

806,011

825,637

817,998

Property and equipment, net of accumulated depreciation of $1,254,126, $1,227,121 and $1,197,253

623,285

625,525

638,727

Goodwill

56,794

56,794

46,917

Deferred income taxes

56,406

57,686

41,447

Other long-term assets

38,236

39,839

38,240

Total assets

$

1,580,732

$

1,605,481

$

1,583,329

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

219,423

$

256,031

$

226,684

Trade payable program liability

137,214

129,801

149,357

Accrued expenses

224,399

237,403

231,580

Deferred income taxes

70,785

69,373

55,236

Current maturities of long-term debt

2,000

2,000

2,000

Total current liabilities

653,821

694,608

664,857

Long-term debt less current maturities

220,000

199,500

197,000

Other long-term liabilities

46,899

48,485

50,960

Deferred gain from asset sales

108,521

114,823

121,125

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $1 per share:

Authorized 500,000,000 shares; issued 68,557,041 shares

68,557

68,557

68,557

Additional paid-in capital

297,924

297,009

295,882

Retained earnings

432,476

432,332

438,035

Accumulated other comprehensive income

213

379

711

Treasury stock, at cost - 15,265,028 shares; 15,358,872 shares and 15,417,020 shares

(247,679

)

(250,212

)

(253,798

)

Total stockholders’ equity

551,491

548,065

549,387

Total liabilities and stockholders’ equity

$

1,580,732

$

1,605,481

$

1,583,329

Supplemental balance sheet information:

Working capital

$

152,190

$

131,029

$

153,141

Current ratio

1.23

1.19

1.23

Accounts payable to inventory ratio

54.1

%

57.4

%

57.9

%

Total debt as a percent of total capitalization

28.7

%

26.9

%

26.6

%

Debt as a percent of total capitalization, net

25.0

%

23.5

%

19.6

%

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(dollar amounts in thousands, except per share amounts)

Thirteen weeks ended

Twenty-six weeks ended

August 2, 2014

August 3, 2013

August 2, 2014

August 3, 2013

%

%

%

%

Amount

Sales

Amount

Sales

Amount

Sales

Amount

Sales

Merchandise sales

$

400,931

76.3

$

412,317

78.1

$

812,837

76.4

$

829,467

78.0

Service revenue

124,842

23.7

115,302

21.9

251,758

23.6

234,325

22.0

Total revenues

525,773

100.0

527,619

100.0

1,064,595

100.0

1,063,792

100.0

Costs of merchandise sales

280,100

69.9

273,764

66.4

565,147

69.5

570,638

68.8

Costs of service revenue

121,376

97.2

115,147

99.9

242,024

96.1

232,605

99.3

Total costs of revenues

401,476

76.4

388,911

73.7

807,171

75.8

803,243

75.5

Gross profit from merchandise sales

120,831

30.1

138,553

33.6

247,690

30.5

258,829

31.2

Gross profit from service revenue

3,466

2.8

155

0.1

9,734

3.9

1,720

0.7

Total gross profit

124,297

23.6

138,708

26.3

257,424

24.2

260,549

24.5

Selling, general and administrative expenses

120,624

22.9

120,929

22.9

247,694

23.3

239,133

22.5

Net gain (loss) from dispositions of assets

(400

)

(0.1

)

(31

)

—

(410

)

—

(147

)

—

Operating profit

3,273

0.6

17,748

3.4

9,320

0.9

21,269

2.0

Other income

316

0.1

466

0.1

758

0.1

844

0.1

Interest expense

3,002

0.6

3,562

0.7

6,784

0.6

7,242

0.7

Earnings from continuing operations before income taxes and discontinued operations

587

0.1

14,652

2.8

3,294

0.3

14,871

1.4

Income tax expense

764

130.1

(1)

9,273

63.3

(1)

1,831

55.6

(1)

5,565

37.4

(1)

(Loss) earnings from continuing operations before discontinued operations

(177

)

—

5,379

1.0

1,463

0.1

9,306

0.9

Loss from discontinued operations, net of tax

(96

)

—

(11

)

—

(125

)

—

(75

)

—

Net (loss) earnings

(273

)

(0.1

)

5,368

1.0

1,338

0.1

9,231

0.9

Basic earnings per share:

Earnings from continuing operations before discontinued operations

$

—

$

0.10

$

0.03

$

0.17

Discontinued operations, net of tax

—

—

—

—

Basic earnings per share

$

—

$

0.10

$

0.03

$

0.17

Diluted earnings per share:

Earnings from continuing operations before discontinued operations

$

—

$

0.10

$

0.03

$

0.17

Discontinued operations, net of tax

—

—

—

—

Diluted earnings per share

$

—

$

0.10

$

0.03

$

0.17

Other comprehensive (loss) income:

Derivative financial instruments adjustment, net of tax

(128

)

1,578

(166

)

1,691

Other comprehensive (loss) income

(128

)

1,578

(166

)

1,691

Comprehensive (loss) income

$

(401

)

$

6,946

$

1,172

$

10,922

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

Twenty-six weeks ended

August 2, 2014

August 3, 2013

Cash flows from operating activities:

Net earnings

$

1,338

$

9,231

Adjustments to reconcile net earnings to net cash provided by continuing operations:

Net loss from discontinued operations

125

75

Depreciation

36,346

40,185

Amortization of deferred gain from asset sales

(6,302

)

(6,302

)

Amortization of deferred financing costs

1,311

1,302

Stock compensation expense

1,799

1,660

Deferred income taxes

2,727

1,825

Net loss from dispositions of assets

410

147

Loss from asset impairment

3,839

2,849

Other

(79

)

(269

)

Changes in assets and liabilities, net of the effects of acquisitions:

Decrease in accounts receivable, prepaid expenses and other

12,572

9,647

Decrease (increase) in merchandise inventories

12,807

(8,624

)

Decrease in accounts payable

(34,591

)

(18,611

)

Decrease in accrued expenses

(15,167

)

(696

)

Decrease in other long-term liabilities

(1,277

)

(1,100

)

Net cash provided by continuing operations

15,858

31,319

Net cash used in discontinued operations

(300

)

(121

)

Net cash provided by operating activities

15,558

31,198

Cash flows from investing activities:

Capital expenditures

(39,010

)

(24,502

)

Proceeds from dispositions of assets

35

18

Release of collateral investment

—

1,000

Net cash used in investing activities

(38,975

)

(23,484

)

Cash flows from financing activities:

Borrowings under line of credit agreements

339,179

1,354

Payments under line of credit agreements

(317,679

)

(1,354

)

Borrowings on trade payable program liability

94,353

80,690

Payments on trade payable program liability

(86,940

)

(81,051

)

Debt payments

(1,000

)

(1,000

)

Proceeds from stock issuance

496

592

Repurchase of common stock

—

(1,246

)

Net cash provided by (used in) financing activities

28,409

(2,015

)

Net increase in cash and cash equivalents

4,992

5,699

Cash and cash equivalents at beginning of period

33,431

59,186

Cash and cash equivalents at end of period

$

38,423

$

64,885

Supplemental cash flow information:

Cash paid for income taxes

$

660

$

3,288

Cash received from income tax refunds

$

244

$

51

Cash paid for interest

$

5,584

$

6,108

Accrued purchases of property and equipment

$

3,537

$

2,031

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE

(in thousands, except per share data)

Thirteen weeks ended

Twenty-six weeks ended

August 2, 2014

August 3, 2013

August 2, 2014

August 3, 2013

(a)  (Loss) earnings from continuing operations before discontinued operations

$

(177

)

$

5,379

$

1,463

$

9,306

Loss from discontinued operations, net of tax

(96

)

(11

)

(125

)

(75

)

Net (loss) earnings

$

(273

)

$

5,368

$

1,338

$

9,231

(b)  Basic average number of common shares outstanding during period

53,528

53,392

53,499

53,388

Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price

—

578

526

591

(c)  Diluted average number of common shares assumed outstanding during period

53,528

53,970

54,025

53,979

Basic earnings per share:

Earnings from continuing operations before discontinued operations

(a) / (b)

$

—

$

0.10

$

0.03

$

0.17

Discontinued operations, net of tax

—

—

—

—

Basic earnings per share

$

—

$

0.10

$

0.03

$

0.17

Diluted earnings per share:

Earnings from continuing operations before discontinued operations

(a) / (c)

$

—

$

0.10

$

0.03

$

0.17

Discontinued operations, net of tax

—

—

—

—

Diluted earnings per share

$

—

$

0.10

$

0.03

$

0.17

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

ADDITIONAL INFORMATION

(dollar amounts in thousands)

Thirteen weeks ended

Twenty-six weeks ended

August 2, 2014

August 3, 2013

August 2, 2014

August 3, 2013

Capital expenditures

$

24,445

$

11,662

$

39,010

$

24,502

Depreciation

$

18,026

$

19,328

$

36,346

$

40,185

Non-operating income:

Net rental revenue

$

284

$

350

$

683

$

600

Investment income

46

42

93

91

Other income

(13

)

74

(18

)

153

Total

$

317

$

466

$

758

$

844

Comparable sales percentages:

Service

5.4

%

0.2

%

4.3

%

2.2

%

Merchandise

-3.8

%

-1.7

%

-3.3

%

-0.8

%

Total

-1.8

%

-1.3

%

-1.6

%

-0.2

%

Total square feet of retail space (including service centers)

12,807,000

12,830,000

Store count

Supercenter

565

570

Service & Tire Center

228

193

Retail Only

6

6

Total

799

769

Sales and gross profit by line of business (A):

Service center revenue

$

288,302

$

280,905

$

582,215

567,882

Retail sales

237,471

246,714

482,380

495,910

Total revenues

$

525,773

$

527,619

$

1,064,595

$

1,063,792

Gross profit from service center revenue, prior to impairment charge

$

62,063

$

62,916

$

126,798

116,072

Service center revenue impairment charge

(1,379

)

(1,323

)

(2,335

)

(2,339

)

Gross profit from service center revenue

$

60,684

$

61,593

$

124,463

$

113,733

Gross profit from retail sales, prior to impairment charge

$

64,901

$

77,459

$

134,464

147,326

Retail sales impairment charge

(1,288

)

(344

)

(1,503

)

(510

)

Gross profit from retail sales

$

63,613

$

77,115

$

132,961

$

146,816

Total gross profit

$

124,297

$

138,708

$

257,424

$

260,549

Comparable sales percentages by line of business (A):

Service center revenue

-0.2

%

-0.1

%

-0.6

%

1.9

%

Retail sales

-3.6

%

-2.6

%

-2.7

%

-2.4

%

Total revenues

-1.8

%

-1.3

%

-1.6

%

-0.2

%

Gross profit percentage by line of business (A):

Gross profit percentage from service center revenue, prior to impairment charge

21.5

%

22.4

%

21.8

%

20.4

%

Impairment charge

(0.5

)

(0.5

)

(0.4

)

(0.4

)

Gross profit percentage from service center revenue

21.0

%

21.9

%

21.4

%

20.0

%

Gross profit percentage from retail sales, prior to impairment charge

27.3

%

31.4

%

27.9

%

29.7

%

Impairment charge

(0.5

)

(0.1

)

(0.3

)

(0.1

)

Gross profit percentage from retail sales

26.8

%

31.3

%

27.6

%

29.6

%

Total gross profit percentage

23.6

%

26.3

%

24.2

%

24.5

%